tv U.S. Senate CSPAN June 8, 2011 9:00am-12:00pm EDT
i trust the federal reserve will do its job. i think it can produce a good rule, a rule that's fair to consumers, retailers, small businesses and the banks too. let me go to senator corker's point. senator corker said you know the problem with senator durbin's amendment, he just doesn't allow the banks to add in all the possible charges and costs in a debit card transaction. he's just allowing them to count the value of the dough in the pizza and not all the other things that they might add in. no. what we said was, you could charge a fee, reasonable and proportional to the cost of the transaction. pretty simple right, reasonable and proportional. well, this amendment on the floor decided to open the door wide open. it's no longer reasonable and proportional. they have full pages here describing all the different things the banks can add in to establish the fee they charge
small businesses and consumers. are you trusting of these banks to be careful in what they add in? i'm not. and i can tell you that when you look at the list of things that they can include, it includes executive compensation because it's about the cost of the operation of the program. that happens to include a lot of managers and officers as well. and i don't know what else it includes. it is wide open. so here's what the banks have said. incidentally, i guess it is somewhat gratifying when your name gets associated with an amendment and you hear it over and over again. chase, for example, wrote to every person who was a customer in my home state of illinois and said, beware of the durbin amendment. if the durbin amendment goes through, it reduces the debit fee charge that we can charge. your fees are going to up. your benefits and premiums are going down. here's what chase failed to mention and the other banks as
well. the total amount the big three banks take in a year from debit card fees is about a little over -- almost half of the total amount collected. so it's about $8 billion a year. and so the argument that they are making is that if you cut our debit card fees, well, i'm sure your fees are just going to have to go up. it's just one of those things and the cost of doing business. what mr. diamond and the others in the business failed to note is that last year on wall street, the banks awarded in bonuses, bonuses, $20.8 billion. so when they argue an $8 billion loss means fees is going up or does it mean bonuses are going down on behalf of consumers and businesses all across america. that's part of it. now, let me tell you a few things about the pending amendment you should know. as i mentioned, it's not a
compromise, second, it includes costs of doing business. we're going to add the atm fees pretty to the debit cards. get serious. that's up to 44% of the transaction. that's how it's designed. third, they very carefully wrote this to there's no effective date of the rule. oh, they talk about 12 months. here it says the board will decide what the effective date will be. there's no effective date going into effect. and that is awful. and finally, the arguments that are made on the floor over and over and over again is we just want to protect the community banks and credit unions that's why we're doing this. not a word in here -- one reference. i take that back. one reference or one trigger to these smaller exempt institutions. there were ways and they know it, if they wanted to, to have even more protection and reassurance for the smaller community banks and credit unions. they didn't include them because that isn't what this about.
this is about all of the banks. and particularly, the big giant banks on wall street. that have a stake in this amendment $8 billion a year in profits. $8 billion a year in subsidies through this amendment and through the second round of bailouts. it's a good test. it's a good test for the senate. i don't know how it's going to end. i won last year, but they poured it on ever since. and the banks have done everything they can to reverse what we accomplished last year. it's up to my colleagues now. they have to decide whose decide they're going to be on. it's pretty simple. they will be on the side of the banks and the credit card companies or on the side of consumers and businesses across america to give them a fighting chance. how many speeches have we heard on the floor of the senate about small business. boy, if we could just give small business and unleash the power of their expansion and hiring
more people, we can turn this economy back where it should be. well, this will be a direct hit on small businesses all across america if this pending amendment is enacted. this is our chance. to say to the big banks on wall street, if you can have $20.8 billion in bonuses last year, you're doing quite well, thank you. incidentally, one of these banks had a 48% increase in profits. they're doing okay, folks? we don't need a tag day for any of the wall street banks. and secondly, if you do believe in businesses, particularly small businesses, merchants and retailers in your hometown, for goodness sakes fight for them. that's what they're asking for. that's what this debate is all about. let's wait for this rule to come out. let's defeat this amendment and let's see what the federal reserve have says and i've given my word and i'll say it again. i'll work with any senator on either side of the aisle if we need to have any kind of reassurance or protection added to what we have done in this law, i'm there. as i've said many times, the only perfect law that i'm aware
of is carried down a mountain on stone tablets by senator moses. the rest of the time we just do our best. and if there's a way to improve it, i'll be there. but let us at the end of the day finally, finally, finally stand up for consumers and small businesses across america and say to the wall street banks and visa and mastercard, sorry, this party is over. i yield the floor. >> mr. president? >> yes, the senator from tennessee. >> i rise to speak about the tester-corker amendment that hopefully will be before us shortly. i have to say i just witnessed a great discussion of populism and that is, you know, if an institution is making some money, let's take it from them and give it to others in the name of fairness. and, mr. president, i think everybody knows that certainly there are a lot of tremendous numbers of small institutions
across america that are very concerned about the durbin amendment and its effects on a number of small retailers. but there's no question -- let's face it, the big boxes, my friends, wal-mart, home depot, target -- they have funded this effort as i mentioned on k street with the lobbyists, and there's no question that a lot of the larger financial institutions have funded the effort on the other side. there's no question. but the people that i think senator tester and myself and you and others listened to are those folks that come in from our home states, the small community banks and credit unions around our country that are very concerned about this. let me talk about a couple of things. number 1, the senator from illinois talked about the timing. well, we've been trying to find some vehicle to attach to this amendment to for some time. the fact is, the senate hasn't done any business this year. i mean, we come in from time to time and vote on a noncontroversial judge but we've
been trying to find some vehicle to attach this to. we've been trying to do that for months. secondly, the fed, the federal reserve which has been asked to put forth this rule, they are the ones that are saying, what you've asked us to do is not appropriate. i mean, they've testified publicly saying that the durbin amendment is inappropriate. let me describe what he just said about reasonable and proportional. that means that, mr. president, if you went out and built a debit system, you invested in all the technology, the computers, the marketing, the fraud prevention -- all the things that went into that, what the fed can look at now in setting the price is after you set all that up and you're processing millions of transactions a year, if you send one more transaction across the wire, what does that cost to you? after you invest in all, that's
what he's saying about regional and proportional. there's no way any business in america could possibly operate under that scenario. again, retailer after retailer after retailer has been in my office and has said, we know that criteria that's been laid out by the durbin amendment is absolutely inappropriate. we couldn't function. we couldn't function with that criteria. but we don't know of any other way of solving this problem. we hate to have the fed involved in price setting so all of us set out -- many of us tried to solve that and what we have, in fact, set up a compromise and what it says is, okay, we agree the debit card industry should be regulated. we agree that retailers are having difficulty in negotiating with visa and others. let's get the fed to set the prices based on the cost of the transaction, which do include, i hate to say, some fixed costs in
technology and other kinds of things, fraud prevention. the fed has asked us to do that. it's not as if we're usurping the fed coming in and making a rule. they testified publicly that the way the durbin amendment is written is going to be terrible for community banks and rural banks. i mean, i think we all know the senator from illinois like to use these larger institutions, but all of us know the big guys just get bigger, just get bigger when we do these kind of things and create hardships for the smaller institutions. and the fact that some two-tiered system was set up won't work. i mean, the fdic has come in and said, look, you cannot make it work where the small banks and small credit unions, it won't work. the fcr has said it won't work. market forces will take over. it won't work. they are going to get crushed. the state -- the state bank
commissioners have come in and said, the durbin amendment as written is going to be disastrous to consumers. it's going to be disastrous to the smaller institutions with which we all deal. so, look, i'm not trying to carry water for either side. i'm trying to come up with a solution that's fair. i've worked with senator tester, senator crapo, senator hagan, senator bennett, senator brown -- numbers of people to try to come up with language that hits that sweet spot. and the senator from illinois is right. we probably never developed a perfect law but i think we have a responsibility, when we know that something is about to happen, that won't work, that is going to be devastating, i think we have an obligation to try to to come up with something that meets the test of trying to be
fair to both sides and i think that's what this amendment does. you know, the senator talked about all kinds of things being added in, the banks can't just add it in. the fed's regulating them. the fed will decide what is reasonable and proportional. the fed will decide that they will use all of the costs that it takes to actually do those operations and the costs which the durbin amendment did not do. so, look, i think that this amendment meets the test. i know there are numbers of people that voted for the durbin amendment in the past that have co-authored this. they co-authored this because they realized that the durbin amendment was far too narrow. that the durbin amendment didn't take into account anything but again, the cost of adding one transaction on top of an infrastructure that you'd already built. no, there's no business that could operate that way.
the presiding officer used to be part of a weekly broadcast. and if all you charged was the incremental cost of that going out and being broadcasted to other television stations around the country -- and that was the only cost you could get, there's no way that our presiding officer would have been known to america the way that he's known because there's no way that operation could have succeeded. this is a very commonsense solution. and those people who supported the durbin amendment during this debate, even though there was never a hearing heard, pretty major issue to never have a hearing in the banking committee, but to pass at the height of the time when many people around this country were upset, rightfully so, with some of the larger players in our financial system, people have woken up. they realized that this is a really bad piece of policy. but if we tweak it, then the retailers still end up with a regulated market where they're
not overcharged and yet the institutions that are providing -- this is a service, by the way, or people wouldn't use it. the retailers like getting their money instantly. people like being able to carry around plastic to pay their bills instead of cash. but what this amendment does is put it in the middle of the road where it's fair to the retailers. it's fair to the institutions that are involved and most of all it products consumers around the country. i think you've seen the letters sent out as to what's going to happen to consumers if the durbin amendment goes into effect as it is now laid out. so the senator does a really great job, i know, in taking a few of these institutions that no doubt behaved badly in causing the whole thrust of this to be about sticking a stick in the eye of these institutions that have paid bonuses and bad decisions but the fact is this
is a bad policy as it exists. the tester-corker amendment and many other cosponsors is something to try to bring that in the middle of the road and i just ask each senator please just spend 10 minutes with your staffers, understand what the third round of revisions does. look at what a commonsense solution has been put forth by the best of this body happening. that is people working together to try to get there and hopefully we can end up with a piece of legislation that we're all proud of. we can continue to have a financial system that's strong, that includes the many small players that we depend upon in small communities across this country and we can also continue to have a vibrant retail industry that really counts on the additional sales that they get from having access to these sites of transactions. and with that, mr. president, i thank you. and i yield the floor. >> mr. president -- >> the senator from california.
>> mr. president, i just wanted to make sure the senator from tennessee knows that his amendment is pending. it has already been put into play and we are on it at this time. i just wanted him to be sure he knew that. >> thank you. there was some discussion a minute ago about how that was going to occur. i thank you for that. and i thank you for your deft management of this bill. >> well, thank you very much. you probably won't agree on my position on your amendment, but i do know that my friend has worked long and hard with senator tester and others. i really appreciate all the time that you have put in to try to come up with what you consider to be a compromise. i do want to say this, you talk a lot about the durbin amendment. there is no durbin amendment. it's the law. the durbin amendment was included in the bill. it is now the law of the land. so it is a question of saying that we should essentially repeal it or delay it. you could study it, whatever the
word is before they have a chance to actually go forward. i understand that and i just wanted to say for the record where i stand on it is that, you know, i have met with all sides. i've met with the retailers who were very strongly supportive of the durbin law. and i have met with the banks that are fiercely against it and the credit unions who are very worried that they are going to get hit with a situation where they won't be able to compete with the banks. and i have told them all the same thing, which is i think what's important when we pass a reform is to see if it's going to work. and if it doesn't work, i agree with senator durbin, we'll do everything in our power. and i understand that the fed says, help me. give me guidance. i think there's a lot of guidance in the law. and i think every bureaucracy in the world would rather have the details fall on us.
and i think the details fall to them. so i am going to be voting no on the amendment. i do appreciate, however, all the work and all the time and effort that went in to trying to pull us all together. i'll say the last thing on the swipe fee that i find compelling -- the law was signed -- the reform, the swipe fee reform, that my friends want to delay, was signed into law last year. places reasonable constraints on the fees that visa and mastercard fix on behalf of the nation's largest banks but here's the thing. utah has the highest interchange rates in the world and the rates just keep going up. the average debit interchange fee in the u.s. is 1.14%. the average debit interchange fee in the european union is 0.0 interchange rate.
and the debit interchange fee in canada is zero. so it's not as if the banks are taking it on the chin here. i just feel -- give this a chance to work. i'm not standing here saying it's the perfect law. as senator durbin said, maybe there was one tablet, the ten commandments. but as far as laws here, it could all be made better and it may well be once the fed acts that we're not happy and we can move at that time but i wanted to really get back to the bill, the underlying bill, that we're debating which is the economic development administration, a reauthorization. and to thank senator inhofe for his remarks that he made on the floor about it and his pointing out that we have a lot of work to do here to create jobs. and when we have a program that takes a dollar of federal funds
and it subtracks $7 of private investment and many, many jobs, we ought to come together. i'll just go through a couple of charts here. >> the eda is an efficient job creator. they just are. in '09 and 2010, investments by eda created over 160,000 jobs and saved 45,000 jobs. a dollar of eda investment is expected to attract -- and this is a fact. it has attracted $7 in private sector investment on average. sometimes it's $10. sometimes it's 15. sometimes it's 4, 3 and 2. but the average is $7. the eda project funding creates one job for every 2,000 to $4,600 invested. so you can see that the average cost of creating a job is very, very low in terms of the federal investment.
this is terrific. i mean, this program really works. and there are a couple of things that we felt we ought take a look a look at, duplications away for a community to buy out the federal government share of a project. we've put that into the reauthorization so we think we have really strengthened this law. and again, i want to thank the democrats and republicans on the environment of public works committee. i went through this morning some of the programs in california, city of dixon, $3 million for a water system created, is expected to create 1,000 jobs and leverage $40 million in private investment. 3 million attracting 40 million in private investments. city of haster, 2 million for sewer and water. it's going to develop an additional 600 acres to enable continued growth of the east chapter logistical center and
expected to create 1400 jobs and leverage 253 million in private investment. in san jose, $3 million for the expansion for the center for employment training. they can then expand their capacity by 860 students, expand access to the ged, the literacy, language and small business entrepreneurship classes to low-incomed areas. this is key, absolutely key. i mean, it really should bring us together because they are training students so that students get out and get their geds, get their literacy and can really make sure that the community is growing and thriving. that particular grant is expected to leverage 3 million in private investment and 4900 jobs. so it's a one-to-one. it's 3 million of public and 3
million of private. nationwide, i talked about this. >> i talked about other examples. i didn't mention actually on the west coast in the central valley, 23,000 square foot water and energy technology incubator. and the incubator has housed more than 50 entrepreneurs since it opened in '07. they've obtained 17 million in private capital and created jobs for california. so 1.8 million, attracts 17 million. we have a case of boeing where they were able to expand one of their campuses. they created 2500 jobs. and i talked about, mr. president, to you about duluth. in '01, an eda grant of 5.5 million matched by 2.3 from the city of duluth helped build the duluth aviation business incubator at the duluth airport.
this investment help -- is it s cirrus, mr. president, to 112 employees '08. the cirrus design option has the largest share of the worldwide general aviation market. so when we're talking about the eda and we're talking about the way it attracts private sector funding and creates jobs, this isn't hyperbole. this isn't just rhetoric. this is reality. and this is a program that's been going on since 1965. 1965. and republicans and democrats have supported it. the last time it was authorized was when george w. bush was president. it passed unanimously. so i stand here today on the opening day full of hope. full of hope, hoping that it's
not naive. hoping that we will see a few amendments. that's all fine. we don't mind amendments. amendments are fine. but let's have reasonable discussion and reasonable time set aside and move on. there's a case in the maytag plant in newton, iowa. they employed 1800 factory and administrative workers. it was closed down. we all know how painful that is. and we remember back when we were losing 7, 800,000 jobs a month. it wasn't that long ago. by '08, the city identified two new operating operations. a manufacturer of massive steel towers for windmills. eda invested $580,000 in '08 for grading site preparation surfacing for a wind tower storage facility that was leased
to trinity created 140 jobs and generated 21 million in private investment. that same year, 670,000 to central iowa water association in newton to help build a booster station, a storage tank to serve tpi. this project helped create 500 jobs and generated 40 million in private investment. on the east coast in 2010, eda gave a $750,000 grant to seed co financial services, a national nonprofit community development financial institution. seedco used its funding to provide capital to subzero installation and refrigeration technologies which is a family operation of custom, environmentally friendly energy efficient refrigeration insulated commercial truck and van liners, subzero is pretty famous. and they're located in brooklyn, new york.
they had been denied financing by a major bank. see, this is the thing. a lot of our companies can't get -- while the banks want to charge very high, you know, swipe fees, they're somehow absent when our companies needed them. and in 2010, that's just last year, subzero was denied financing. eda provided the access to capital, which allowed subzero to fulfill its contracts to edible arrangements and to wind contracts with ford, chevy and dodge. this allowed subzero to hire 15 new staff starting in '04 with just three employees and producing 75 vehicles a year. the company has 20 employees and approximately produces 400 vehicles a year. it goes on. eda provided 2 million to help build the knowledge works preincubator facility as part of the development of virginia tech. and now we've seen 2,000 highway jobs created and the inception
of 140 high tech businesses. the way eda works, mr. president, is there's regional offices, about six of them, and they get funded through the appropriations committee to commerce department and then each region makes the decision as to which projects really meet the goals of the legislation, which is to bring economic development to distressed areas, create jobs and leverage the dollars. so in addition to this, eda in '08, we gave them an extra 500 million in disaster assistance to give to areas which were experiencing disaster problems. and they assumed the role of a secondary responder working with affected communities to support long-term post-disaster rebuilding. an example of that, again, back in iowa, they provided funding to help instruct and install an
energy efficient fire and gas broiler as an that had provided steam heat and hot water to st. luke's hospital and the college. we all know what happened when a hospital can't count on a backup generator, they can't count on energy. we know what happens when that occurs. everything shuts down. and people are in peril. eda steps in areas and while fema is dealing with the immediate impacts, they're looking a little bit more at the long-term work that could be done so that when and if there's another disaster, the community is ready. so all i could tell you is, you know, it's -- nothing is perfect and i'm sure there are examples that we have that aren't as good as the ones i mentioned. i'm sure there are. 'cause nothing is perfect and nobody's perfect. but -- >> on this wednesday morning june 8th, the u.s. senate is about to gavel in to start the
day. first up general speeches for about an hour. and then in about 10:30, lawmakers will continue debating the economic development bill. among the issues being discussed, an amendment offered by montana democrat jon tester to delay the capping of debit card fees. those caps which were passed into law last year as part of the financial overhaul bill are due to go into effect next month. the amendment would delay them for another year. a test vote on that is scheduled for 2:00 pm eastern and will require 60 aye votes to pass. and now live coverage of the u.s. senate here on c-span2. the presiding officer: the
senate will come to order. the chaplain, dr. barry black, will lead the senate in prayer. the chaplain: let us pray. o god of light and truth, in these challenging times, enable our senators to hear your still small voice. may this awareness of your presence renew their spirits and lift their vision of what this nation can become by your grace. may they be people dedicated to moral values and determined to live by the highest ethical
standards possible. lord, keep them from success that is purchased with cowardice, cunning, or deception. enable them to experience the constancy of your presence so that they will choose the harder right and leave a legacy that honors you. we pray in your holy name. amen. the presiding officer: please join me in reciting the pledge of allegiance. i pledge allegiance to the flag of the united states of america and to the republic for which it stands, one nation under god, indivisible, with liberty and justice for all.
the presiding officer: the clerk will read a communication to the senate. the clerk: washington, d.c, june 8, 2011. to the senate: under the provisions of rule 1, paragraph 3, of the standing rules of the senate, i hereby appoint the honorable kirsten e. gillibrand, a senator from the state of new york, to perform the duties of the chair. signed: daniel k. inouye, president pro tempore. mr. reid: madam president, following any leader remarks the senate will be in a period of morning business for one howmple the majority will control the first half. the republicans will control the final half. following that morning business, the senate will resume consideration of the economic development act, with the time until 2:00 p.m. equally divided between the opponents and proponents of the tester amendment. at approximately 2:00 p.m. then, there will be a roll call vote with relation to the tester amendment regarding swipe fees, with a 60-vote threshold.
the presiding officer: under the previous order, the senate will be in a period of morning business for one hour with senators permitted to speak therein for up to ten minutes each with the time equally divided and controlled between the two leaders or their designees with the majority controlling the first half and the republicans controlling the second half. mr. durbin: madam president? the presiding officer: the senator from illinois. mr. durbin: madam president, i ask consent to speak as if in morning business. the presiding officer: without objection. mr. durbin: and, madam president, this afternoon there is a critical vote that's going to take place here on the senate floor. it's one of the most controversial business off oriented votes that we have faced. and i would say that leading up to this vote has been one of the most heated debates and exchanges that many of us in the senate have seen in our time. it relates to an issue that affects almost every american
family and certainly all american businesses and the financial community. and it's a basic question that needs to be resolved on this senate floor. my friend and colleague from montana, senator jon tester, is offering an amendment that i oppose. i have the highest respect for jon, we have discussed this and our friendship has remained strong throughout this debate. we just see this differently, and whatever the outcome of this vote, i certainly am going to continue my strong friendship with jon and be a fan of what he brings to the senate and what he does for the state of montana. joining him is senator bob corker of tennessee in this amendment. i have the same regard for bob -- i should say senator corker. and the remarks i make today have no reflection on them today.
i think they are both honorable people who are standing tall for their point of view, which i lap to disagree with. i do want to make it clear that i think this is an historic vote. it is a threshold vote in terms of whether the united states senate, the congress, and the government of united states will step into a situation that has created a fundamental unfairness. and this is what the unfairness is: when we use debit cards, plastic, to pay for a trans, a there is a fee that is collected. it is a fee that is paid to banks and, of course, a fee paid to the issuing credit card network. the merchant or retailer who accepts that plastic, that debit card, has no voice in determining what that fee will be. and it is invisible. just two floors -- one floor below us here in the capital is
a little carryout, and i went there this morning to pick up a little breakfast, and there was a young lady, a capitol hill policeman, in front of me. and she took a package of chewing gum and put it on the counter and handed her debit card to the cashier. the chewing gum cost $1.20. the average fee paid by the merchant -- in this chase, the proprietor of the carryout -- is 44 cents on that transaction. more than a third of the cost of the pack of chewing gum. now, the owner of the carryout had no voice in that fee. it was a fee that has been imposed on that merchant by the credit card network that issued the debit card. so a year ago we took up this issue and said, is it fair or reasonable? madam president, the reason i
think we need to take a look at it is that in the united states of america, this so-called swipe fee, is dramatically greater than virtually any other country in the world. the same networks -- visa and mastercard -- charge, on average, 1.14% on every transaction using a debit card. if you went to the european union, the average debit interchange fee, is .2%, less than a fifth of what is charged in the united states by the same credit card networks. and then, of course, take a look at canada, just north of the united states, where there is no -- zero -- interchange fee charge 0 on debit card transactions. so why is the united states,
through its consumers, smashings and retailers alike paying so much more? these credit card networks through their issuing banks are charge this because they can. there is no restraint whatsoever, or least there wasn't until last year. we had a debate on the the floor of the senate and we said, on behalf of consumers and small businesses, retailers, mehr mers all across america, should we -- merchants all across america should we establish a reasonable fee for the use of a debit card and we voted with 64 votes to do that. the fee is to be established by the federal reserve. most everyone would concede two things: first, the federal reserve is not partisan. it is going to make this judgment based on the economics of the marketplace in terms of what the fee should be. and, secondly, if there is any
bias at the federal reserve, it is not a bias towards consumers. this is not a consumer protection agency. no one has ever called it that. it is an agency which by and large is more comfortable in the boarboardrooms of major banks ao we gave them this responsibility. and what they came up with, after five or six months of investigation, was a startling discovery. and that was that the interchange fee being charged on debit card transactions in the united states, on average, was 44 cents. that's what the 1.14% translates into, 44 cents a transaction. and that the actual cost to the debit card network-issuing banks was in the range of 12 cents. so what is being charged to consumers and small businesses across america is more than three times the reasonable and
proportional cost of the transaction. at that point, the federal reserve said we're going 20 sit down, as instructed by this law, passed by congress and signed by the president, and come up with a reasonable interchange fee. and they confessed, chairman ben bernanke and others, that it was a challenge, and it is. but they were going to do it and do it right, and they needed more time to do it. chairman bernanke called immediate and say, i need -- called me and said, i need additional time. i said i was sorry to hear that. they had more than 11,000 comments that were posted at the federal reserve about what this fee should be. and they were about to announce before the end of this month what it is about to be. i don't know what the loote rept will saivment i suspect it will be somewhere between 12 cents
and 44 cents with many other provisos included. so that's where we stand. under the law we passed last year, this new debit card see expwraif would go into effect on july 1. it has generated a lot of controversy, particularly among the card networks, visa and mastercard, and the issuing banks that issue these debit cards. they don't like this at all. as senator dale bumpers of arkansas, who used to sit lite right back there, used to say, they hate this interchange fee regulation like the devil hates holy water and they have done everything in their power to stop the federal reserve from issuing a rule which would bring down this 44-cent charge on every swipe of your plastic debit card. and of course they want to do it before the federal reserve
issues their rule. and so today at 2:00 this afternoon on the senate floor the banks and the credit card companies get their chance, get their chance to stop the federal reserve from coming forward with this new approach to the interchange fees. as you can imagine, it is a titanic struggle. because of all the retailers and merchants in the united states, from walmart on down to the corner bogega in manhattan or chicago, they're all involved. when i get into the char that picks me up at o'hare to take me to my apartment in chicago, my driver say, we're pulling for you. every time somebody gives us a debit card, we end up paying more and more because of it. the reach of these charges, i think, may surprise a lot of people. here's a letter that we received yesterday from tom gore did i. he writes to me, on behalf of
the member companies of the armed forces marketing council, i want to offer our sincere appreciation for your efforts to curb the skyrocketing costs to retail business through debit card fees. our particular concern about debit card fees is the adverse impact the fees are having on the pocketbooks and the quality of life of military families through the military,change system. -- exchange s as you are aware, the military exchanges provide a nonpay compensation benefit to military families and support military families' financial readiness by offering name-brand products at an average saving of over 20%. the profits that we generate at the military exchanges are given back to the military community through dividends that support quality programs on military bases, including child-care centers, movie centers, gyms, swimming pools to name a few." now, let's bring it right home to the debate is on the senate loofloor.
"currently the three military systems, army, air force, navy exchanges and the marine corps exchange are having to pay well over $100 million a year combined in interchange fees and the interchange fees are the fast he have 46 growing, uncontrollable expense to the military exchange system. as interchange fees continue to increase, the military exchange systems must often absorb the cost, thus reducing dividends to support military quality of life, or must pass the cost to the military family by raising prices. either way, military families lose because of interchange fees." one example, an example that should be close to home to us. military families that sacrifice for this nation and a system which is designed to help them is paid over $100 million a year
to the issuing banks for the visa and master card debit fees. is $100 million reasonable? is next year if it's twice that amount reasonable? most people would argue that if you believe in a free-market system, you believe in two things: transparency so people know what the rules of the game are, the actual prices and cost. and competition. the honest answer is there is no competition here. visa and master card literally dictate these fees that are collected. and what choice does a merchant have? could you stay in business in america today and not take plastic? well, i guess some people do but not many. the reality is more and more people are using plastic to buy things as basic as a pack of chewing gum for $1.20, which i just saw this morning. and that's where this debate comes down. so the question is whether or not we'll let the federal reserve issue this rule, take a close look at it, watch its
implementation and respond if needed. i don't know if their rule will be excellent or need help. i'm prepared to stay the course with it. if we need to address it in any aspect with further legislation, i want to do that. and i particularly want to address my friends, at least some friends that i have left, in the banking community. i am not going to stand here in defense of wall street. i think they have had quite a bit of friendship and love thrown their way by this congress over the last few years. i am going to say, though, that when it comes to community banks and credit unions, i think they deserve an exemption. it was included in the law. and if we need to provide any other reassurances after the rule is issued, i'll be there. and i believe i can speak for the merchants and retailers. they'll be there as well. they have never disputed this issue of the community banks and credit unions being treated
differently than the big banks. but i do want to make it clear what is going on here in terms of the biggest banks that issue these debit cards. $1.3 billion a month is collected in debit card interchange fees. $1.3 billion, more than $15 billion a year. three banks: bank of america, chase and wells fargo, control 50% of the debit card market. and they will collect nearly $7 billion in fees this year off of these debit cards. as i mentioned to you, the merchants and retailers have no voice in this. they pay what they are told they have to pay. and they collect it from consumers. now jamie diamond is a person i've known. he is the c.e.o. of chase bank. i've worked with him when he was in chicago. i have had many conversations
with him when he moved back to new york. i respect him for his business acumen. but he has been particularly pointed in going after this regulation of interchange fees. he has called it idiotic in letters to shareholders and its customers. and chase has written to all of their debit card customers across the united states and said this so-called durbin amendment -- it is now ao law -- this law will mean that chase will have to raise fees on the people holding debit cards because they will collect less from debit card interchange fees. well, it seems to make sense, doesn't it? if less revenue is coming in, that they'll make it up some way. but i want to call the attention of those following the debate to this fact. the bonuses distributed by the banks on wall street last year amounted to $20.8 billion. if they lost every nickel in
interchange fees on debit cards, it wouldn't even get close to the amount they paid out in bonuses to their executives. so before mr. -- before chase bank -- i don't want to be personal about this -- before the chase bank threatens its customers about increased fees and reduced benefits, let them be honest with their customers about the bonuses that are being paid. that bank, chase, if i'm not mistaken, had an increase in annual earnings of 48% this year. they're doing quite well, thank you. and, for the record, let me remind those who are following this debate the taxpayers of america were asked to stand by these banks in one of their darkest hours. when we faced this recession -- and many of us believe it was brought on by some awful practices on wall street and among other banks, insurance companies, and financial
institutions around the world -- in their darkest hours, when things were toughest, where did they turn for help? not the good old free-market system, but the treasury of the united states of america. and so in the end, we gave -- we gave $25 billion to the chase bank. we gave $45 billion to bank of america and $25 billion to wells fargo to help them through their time of need. oh, sure, they survived and they paid us back. but what was their gratitude? how was it reflected? it was reflected by these banks after receiving taxpayers' money to get them out of the hole that they dug for themselves, turning around and awarding bonuses to their executives right and left. that's not an expression of gratitude where i come from. and now they come to us and say we want you to continue this subsidy, this interchange fee subsidy. 50% of which go to the three largest banks in the united
states of america. well, i think it's time for us to say no. i think it's time to stand for consumers and small businesses across america who have no voice, no power and deserve our help in making this system fairer, more transparent and more competitive. the amendment before us is one that i want to address specifically because instead of letting the federal reserve issue their rule at the end of this month measuring whether its impact is as we had planned, responding if needed to changes, what the banking community and the credit card networks want to do is to kill this rule literally in the cradle before it has a chance to be issued, before it has a chance to be implemented. i think that's just plain wrong. right now i hear my colleagues who come to the floor for this amendment, both senator corker and senator tester, saying this is a compromise. this is a compromise. this is not a compromise,
because a compromise involves sides with differing views sitting down together and working out their differences. i wasn't invited to any meeting to come up with this so-called compromise. the merchants and retailers, the businesses across america were not invited. not at aufplt there were no representatives of consumers at these meetings for this grand compromise. this is a compromise between the biggest banks, medium banks and small banks. it is a banker's compromise for a banker's benefit. in the last two days letters ofpzing this -- opposing this amendment have been issued by consumer groups. incidentally, our kids at college bookstores using debit cards are actually paying more for their books because of these fees as well. 308 national and state merchant trade associations and 6,500 small businesses all opposing
this so-called compromise amendment. it isn't a compromise. secondly, this amendment is described as a one-year delay of the interchange rule making. actually it's an open-ended delay. the bankers who wrote this very carefully crafted it. the amendment requires the federal reserve's rules to be rewritten in one year, but it doesn't set an effective date for the revised rules. there is no telling when, if ever, these rules will go into effect. this delay could be significant. and from the bank's point of view, the longer the delay, the better. what's it worth? $1.3 billion a month for every month they can delay it. how long would they like to delay? forever. and let me tell you, this idea of needing a study after putting 12 months -- the federal reserve put 12 months into reviewing this issue, considering thousands of comments to promulgate this rule, the amendment sets up a study of
interchange system that only takes into account the views of the banking regulators. search the amendment, the tester-corker amendment, for one indication that there will be anyone sitting in the room representing the consumers or small businesses of america for the study. not invited, not welcome, not part of the conversation. is this another compromise? a compromise that just involves banking regulators sitting down to decide what's in the best interest of consumers? would you want your fate left to their hands as a consumer? not me. the study, incidentally, is loaded. the so-called triggers in the study, if you take a look at them, if the bank regulators deem that any of the triggers are met, they have to throw out what the federal reserve has done and start over. well, guess what? the triggers are written in a
way that this is a foregone conclusion. these triggers will be met. and as each trigger mirrors public statements, the public regulators have already made about the fed's draft rules, this is loaded. there's nothing objective or unbiased about this whatsoever. the amendment essentially mandates a complete rewrite of the federal rules by the banking regulators for the banking industries in favor of the banks. now let me tell you something else that i think is outrageous about this. what the banks have said is we don't want to measure the reasonable and proportionate cost of a debit transaction to establish the fee we're going to impose. we want to include every variable and incremental cost that we can consider. and this amendment goes on for more than a page with all the possibilities. the amendment provides that the fed must rewrite the rules under a very different standard than the law which currently exists. and the new standard is one that the big banks have been begging
for. the durbin amendment says that fees set by visa and master card on behalf of the big issuing banks have to be reasonable and proportional to the costs incurred that are -- quote -- "specific to a particular electronic debit transaction." end of quote. now the tester-corker amendment would require the fed to let visa and master card fix fee rates to cover bank costs that are not specific to any debit transaction. the tester corker amendment requires the bank to cover interchange fees for program operations including incentives. this is a truck-size loophole the banks are begging for because they know they can get up to 44 cents and beyond, if they can add everything in from the cost of an a.t.m. machine to executive compensation and executive bonuses. honestly, are we going to stand here and say we cannot protect
small businesses across america struggling to survive from outrageous price-fixing by the credit card companies so that we can reward the issuing banks with bonuses? is that what this is about? if it is, it's a pretty stark choice. this amendment is a big-bank windfall. the amendment has been described as an effort to help small banks, but it would be undoubtedly be a windfall for the nation's largest banks. it would give them a free chance to continue their anticompetitive practices for at least another year and then it would require the fed to write traouls in a way that would enable big banks to justify the fees they're charging today. it is a no-change amendment. if you believe, as a member of the senate, that the current system is fair to businesses across america and we shouldn't change it, then voting for this amendment will guarantee your position will be enshrined in law. this proposed amendment is a
gift to the big banks that will keep on giving and deny swipe fee relief to small businesses and consumers who desperately need it. madam president, i ask unanimous consent to enter into the record these three letters that i received from the armed forces marketing council, the american council on education, and public citizen u.s. perg. the presiding officer: without objection. mr. durbin: the groups that stand behind me on this effort know what we're up against. when you take a look at the most powerful special interest groups in washington, you have to put the banking industry near the top, if not on the top, of the ladder. throughout my career, i have tackled them on the floor. i can recall many years ago brand-new to the senate, when i said that we ought to change the banking laws so that we would put an end to the so-called subprime mortgages, and i was in
a debate with phil gramm of texas, who said at that time if the durbin amendment passes, it will be the end of the subprime mortgage business. i lost by one vote. if i would have prevailed, history might have been a little different. the subprime mortgage mess created an economic downturn that we still suffer from. i stood up as well when it came to the foreclosure crisis and said at some point these banks have to be reasonable. you just can't take homes away from people, board them up and watch them deteriorate into nothing. you've got to give people a fighting chance to stay in their homes, and i said at the end, the bankruptcy court should have the last word on that. the banking descrirks the credit unions, the community banks opposed me. take a look across america today at the foreclosed homes in chicago, in aroar a, in springfield, all across my state
and across this nation. the outcome years after i lost that battle, certainly doesn't speak to a stronger america because of these foreclosures. the banking industry beat me on that. well, last year fighting for these small businesses and retailers, i stood up and said, somebody has to step up hey and argue there ought to be fairness in the fees that they charge to businesses and consumers across america. and we rallied 64 senators, a bipartisan group, in support of that. wcialtion the banks want a -- well, the banks want a second run at this. they want to take this game into overtime. they want to come back today and count their friends here and hope they can come up with 60 in the hopes that if the big banks and credit card companies can win this battle, that we'll leaf them alone, we won't ask hard questions about the interchange fees that are charged. i'm asking my colleagues in the senate not to give the banks this overtime, extra-time
victory. give a victory to consumers. they have precious few on the floor of the u.s. senate. stand up for small businesses that do create jobs across america and give them a chance to create jobs in this country by not being overcharged by the credit card networks and biggest banks in merge how many of us have come to the floor and said small business is a key to economic recovery. if you believe it, if you mean it, vote against the corker-tester amendment. that amendment is a blow to small businesses and large alike -- large retailers and merchants alike, all across the united states of america. they stand in support of my effort to have a reasonable interchange fee on debit card transactions and to make sure that they have fighting chance to be profitable, to expand their businesses and to hire more employees. that would be good for economic recovery. a vote for the tester-corker amendment, unfortunately, will be a win for the banks at the expense of an economy that desperately needed our help and support today. madam president, i yield the floor.
mr. mcconnell: madam president? the presiding officer: the republican leader. mr. mcconnell: i am going to proceed on my leader time. the presiding officer: without objection, the leader has that right. mr. mcconnell: yesterday i came to the floor and noted the many troubling signs of a persistently weak economy and how i believe the action of democrats here in washington are seriously undermining the recovery that americans desperately want. and i proposed some things that could be done about it right now. the president says he wakes up every morning asking himself what he can do to create jobs and help businesses succeed. but let me offer a few suggestions. it's not that difficult really. i'm sure the job creators and the workers the president meets with are telling him the same thing they tell all of us every day. most people think washington is too intrusive, that it imposes too many job-stifling regulations, and send too many
mixed signals today for anybody to plan for tomorrow. we know that many who would hire right now are actually holding back because they don't know what else to expect in terms of regulations, in terms of taxes, in terms of mandates, and in terms of fees. in fact, we just learned that a significant percentage of businesses plan to drop their employee health coverage, something the administration assured us repeatedly people didn't have to fear. unexpected jolts like these are causing confusion and anxiety and they're freezing job creators and entrepreneurs in place. beyond that, many americans are also seriously concerned about a government in washington that spends trillions more than it takes in and a national debt that this year will exceed our entire national economy. and many people are also understandably outraged by the fact that the party that occupies the white house and
runs the senate hasn't even taken the time to put together a budget or any other kind of plan to get our nation's fiscal house in order. after all, if the government doesn't plan ahead, how can job creators? if the white house doesn't have plan to pay down the debt or preserve entitlements, why should people have any confidence that something will be done? none of this is news to the president or to the democrats in congress. the fact is, the president and democrats in congress know as well as i do what employers and workers need to prosper and to create prosperity and jobs. they just don't seem to want to do it. that's the problem. and to be blunt, people wonder whether the president is really focused on jobs when so many of his policie policies seem aimedt destroying them. and when there's so much he could do right mao to create tens of thousands of good american jobs.
yesterday i spoke about trade and how even though the president admits that pending trade agreements with south korea, panama and colombia have the potential to create tens of thousands of new jobs and boost american businesses, he refuses to move on them in an apparent favor to his union allies. this morning i'd like to focus on the two sides of the president's energy policy in which he publicly claims to support greater domestic production and the jobs that come with it, even as he seems to do everything he can behind the scenes to block production and to kill energy-related jobs right here at home. the president says he's a proponent of domestic energy production, but let's be honest. he hasn't shown it. and this shouldn't surprise anyone. this is an administration, after all, that appointed an energy secretary who said a month after the president's election that -- quote -- "somehow we need to figure out how to boost the price of gasoline to the levels
in europe" -- end quote. since then, the administration's policies have helped us get there. not only have gas prices skyrocketed, but the administration's policies are also hindering the creation of thousands of good private-sector jobs that so many americans desperately need. let's look at just a couple. everyone knows in the aftermath of the oil spill in the gulf last year the president imposed a six-month mothertorum on new -- a six-month moratorium. what we cannot dispute is that the impact on jobs and the nation's economy has been quite severe. nor can we deny that the white house has effectively continued the ban after its time was up and the review was complete. it was only after the courts got involved and months of political
pressure from both democrats and republicans that the administration reluctantly began issuing new permits, months after the ban was supposedly lifted. and even as gas prices hover around $4 a gallon, permit something still well below pre-spill levels and energy production in the gulf is expected to slow. senator vitter tells us that the administration's annie nick permitting in the gulf or domestic energy production threatens nearly 100,000 jobs every year. in addition to the many thousands of jobs that could be lost every year in industries that are related or dependent on energy. senator vitter has also told us that one estimate suggesting that 23 wells per month are netneeded just to maintain currt production levels in the shallow waters of the gulf. and that even after the
moratorium was supposedly lifted, the administration has averaged fewer than two per month. as for deepwater drilling, the administration has issued a grand total of two new deepwater permits. just two. the other 13 have been for work that was already permitted prior to the moratorium. so the administration's lack of support for energy production in the deepwater has led to five rigs simply pulling up station over the past year and moving their tax dollars and their workers elsewhere in the worltd. this is just one of the ways the administration is holding back job creation in the energy industry. now, this is to say nothing of the administration's actions with respect to alaska's outercontinenoutercontinental sh according to one estimate could create an average of 54,700 new jobs annually for decades,
adding billions in pay and tax revenue. and let's not forget that the administration's impact would be even worse if it had its way and raised taxes on energy producers. which would have only served to strength foreign competitors, raise gas prices even more, put energy independence further out of reach, and give more american jobs. -- and kill more american jobs. by one stirntle the energy tax democrats still want to impose on energy producers could cost 154,000 jobs and $68 billion in lost wages. so for two and a half year, democrats in washington have paid lip service to the idea of job creerks even as they've pursued an agenda that is radically opposed to it. we can see this when it comes to trade, as i indicated yesterday, and we can see it when it comes to energy, as i've discussed
this morning. unless democrats change their priorities and their policies, the threats of a downgrade won't go away. the debt won't get any smaller, businesses won't create the kind of jobs americans need, the president can talk all he wants about the economy, but it's time he starts looking at the impact of his own policies on the economy. we need to change course, and a good place to start is with trade and with energy. american businesses want to expand and want to hire. here are two areas where we could help them do it right now. madam president, i yield the floor. mr. johanns: madam president? the presiding officer: the senator from nebraska. mr. johanns: i ask consent to speak for 15 minutes. the presiding officer: without objection. mr. johanns: madam president, i rise today to stalk about something that is on the -- to talk about something that is on the minds of our agricultural
producers. in meeting in my home state across nebraska it seems the first question is always going to be or the second question is always going to be something related to the e.p.a. and most of the time the question goes like this: what's going on at the e.p.a.? why are they trying to put me out of business? in response to this growing concern, which i am confident the e.p.a. has heard, they've taken to the road with a good, old-fashioned charm owe fen six the problem is that the e.p.a. is selling publicly to farmers and ranchers what they're trying to sell just doesn't match up with reality. they say one thing on the road while the regulatory train just continues to barrel forward right here in washington. in fact, the e.p.a.
administrator is touring the country community after community and saying not to worry -- quote -- "rural areas that e.p.a. is coming after you." yet the regulation continue to come after our nation's farmers, ranchers, small businesses and those regulations are coming fast and furious. even the regional administrator with responsibility for nebraska and iowa and kansas and missouri has joined the charm offensive. in a recent speech to the agricultural business council of kansas city, he said that he does not -- quote -- "see where this administration is doing anything new" -- unquote. but, quite simply, the e.p.a.'s charming rhetoric doesn't match up with its rule-by-rule intent.
let me, if i might, illustrate what i mean. well, let's talk about dust, not the stuff that you find on your book shelf but the stuff that a truck kicks up or a tractor kicks up when it's going down a field or a farm lane. earlier this year a bipartisan group of 33 senators wrote to the e.p.a. we were worried. we were worried that the e.p.a. had plans to regulate farm dust. now, don't get me wrong. plain air is a good thing. we need clean air. but dust is also unavoidable in farm country. farming without kick up dust is like asking a carpenter to cut and frame a house without creating saw dust. well, it just doesn't happen. the two things just don't go
together. well, not to worry, says the e.p.a. message number one in the charm offensive: the e.p.a. doesn't have any plans to do anything as sillily as regulating farm dust. in fact, on march 10, administrator jackson noted that e.p.a. has -- and i'm quoting -- "no plans to do so." it went on to explain that -- quote -- "e.p.a. staff is conducting meetings to engage with and listen to farmers and ranchers well before we propose any rule." unquote. my goodness, that sounds reasonable. well, except that the response letter that the 33 senators received from the e.p.a. contained an entirely different story. that letter written by assistant
administrator gima mccarthy simply said that the source of the dust doesn't matter and that e.p.a. cannot consider costs when it sets the standard. here's how she put it. national air quality standards -- quote -- "are not focused on any specific category of sources or any activity, including activities relating to agriculture or rural roads." unquote. mccarthy further noted that -- quote -- "the agency is prohibited from considering costs." unquote. the letter leaves my nebraska producers and producers all across this great nation wondering what happened. what happened to the e.p.a. administrator saying she wasn't going to regulate farm dust?
this letter sends the exact opposite message. the answer is that there is a public relations effort. and then there's a whole separate effort called the charm offensive effort. and then there is regulatory reality. here are some more examples. on water quality on age 20 the des moines register headlined blair message number two of e.p.a.'s charm offensive -- quote -- "e.p.a. chief has no plans to regulate farm runoff." unquote. well, e.p.a. was addressing another worry in the farm community that e.p.a. would shift from the current state-by-state approach to a more heavy-handed, federal-government-knows-best approach.
it will be our way or the highway federal-government type approach. so again after reading the headline, farmers and ranchers, well, they hoped that maybe the e.p.a. was taking a turn for the more reasonable. but a march 16 letter from e.p.a. to their regional offices once again tells a very different story. the letter lays out a very specific framework how e.p.a. wants states to regulate runoff. so while the headline says e.p.a. will not initiate regulation of farm runoff, well, in reality they are aggressively forcing states to do it for them. now, if that weren't enough, the agency is also trying to expand their authority literally to every irrigation ditch, every low-lying area.
and they even want to regulate your farm pond. the law's very clear that e.p.a. does not have authority over these waters. and after congress refused to enact this expansion of their authority, the e.p.a. decided, well, let's plow ahead anyway, regardless of congressional intent. does that sound familiar with this administration? to make matters worse, they are not doing this through a full rule making process where they would have to do what those pesky public comments and such. instead the e.p.a. sat down with the corps of engineers, the department of interior and the united states department of agriculture and issued a so-called guidance document. that happened in may. e.p.a. claims that this approach
includes exemptions for agriculture. but the whole story isn't told. instead it says irrigated areas, tanks in low-lying areas are -- quote -- "generally not waters of the u.s." generally? what do you mean by "generally"? well, that word "generally" produces a tremendous amount of uncertainty. it creates fear. it creates confusion and gives farmers and ranchers zero peace of mind. you see, they don't trust the e.p.a. further, the guidance shifts the burden of proving exemption from regulation to our producers. instead of the e.p.a. or state regulators being forced to
explain why on earth agricultural producers should be subjected to such regulations, producers will now have to explain why it's ridiculous to regulate their stock tanks in irrigated areas under runoff regulations. this will result, of course, in increased permitting costs, paperwork, other red tape. and it is far from farmer friendly. yet, the empty exemptions for agriculture, well, they don't end there. let's not forget e.p.a.'s backdoor energy tax where e.p.a. is promising farmers and ranchers an exemption. e.p.a. is once again lulling farmers to complacency by sending this message: don't worry, we're not going to force you to buy permits.
to quote the e.p.a. administrator -- quote -- "e.p.a. is proposing reducing greenhouse gas emissions in a responsible, careful manner. and we have even exempted agricultural sources from regulations." well, producers quite justifiably heard the words "exempted agriculture" and may have thought, well, by golly, we're going to be okay here. but the reality is far different and very definitely a course has been set that should concern every single farmer, rancher, small business person in this great nation. the american farm bureau put it best in testimony to the house energy and commerce committee. and i'm quoting -- "any costs incurred by utilities, refiners,
manufacturers to comply with the greenhouse gas regulatory requirements will be passed on to the consumers of these products, including farmers and ranchers. as a result, our nation's farmers and ranchers will have higher input costs, namely, fuel and energy costs to grow food and fiber and fuel for our nation and the world." unquote. so picture this: a nebraska farmer gets the electric bills and calls up the power company and says, wait a minute here, e.p.a. told me that its climate change efforts weren't going to target me it in fact, they said i was exempted. so why am i paying so much more?
unfortunately they're going to have the same conversation with the diesel supplier and the local gas station where they fill up the pickup and truck. the e.p.a. promise of exemption will unfortunately meet the reality of dramatic increases in input costs. e.p.a.'s reassuring words about an exemption will turn out to be absolutely empty, misleading and absolutely 100% unhelpful when the electricity and diesel bill comes due. but the public relations effort and charm offensive mars on. it even includes an executive order titled "improving regulatory -- regulation and regulatory review." that was issued by the president in january. isn't that enticing? the directive instructs each federal agency to consider --
quote -- "how best to promote retrospective analysis of rules that are outmoded, ineffective, inefficient, insufficient or excessively burdensome." unquote. according to the order -- quote -- "our regulatory system must protect public health, welfare, safety in our environment while promoting economic growth, innovation, competitiveness and job creation." unquote. my goodness, that's all of the right words. once again it sounds like we're headed in the right direction. but then in april an e.p.a. official stated that the agency -- this is remarkable. the agency was unaffected by the president's executive order because they do not propose rules where costs exceed the benefits. however, the same official admitted that the agency does
not consider direct job impacts in its economic analysis. can anybody figure that out? these two statements obviously conflict. e.p.a.'s actions in drafting several of these costly, excessive, burdensome regulations fail to meet the goals of the executive orders issued by the president of the united states. but their public relations campaign just speeds forward. back home in nebraska, like other states in this great country, we make agreements on a handshake, because we believe that if you shake somebody's hand, you can trust them. that's the way it works. but, unfortunately, within the bureaucratic walls of the e.p.a., that's not the case. instead of spouting charming
verbiage about the benefits of increased regulation, e.p.a. should be looking for way to work with farmers and ranchers and small businesses to find solutions to environmental challenges while creating jobs for americans who are out of work. after all, the men and women who depend on the land to feed their own families and to feed us, well, they are responsible stewards of the environment. unfortunately, based on what we've seen -- the presiding officer: senator, you've consumed 15 minutes. mr. johanns: may i have 30 seconds? the presiding officer: without objection. mr. johanns: unfortunately, based on what we've seen over the past couple of years, e.p.a. used agriculture producers as offenders, not partners. e.p.a. shift into campaign mode to appear farmer-friendly is disingenuous. they roll out this farm offensive to make it sound like they are farmer friendly. let me just wrap up by saying why not just do it?
be job-friendly, farmer-friendly, agriculture-friendly. thank you, madam president. i yield the floor. mr. sessions: madam president? the presiding officer: the senator from alabama. mr. sessions: i appreciate my colleague's remarks about the agriculture community. i'm certainly hearing that. and one of the very real factors in our inability to create jobs in america are the surging regulations that burden private sector, including the agriculture community.
mr. bernanke, the chairman of the federal reserve, was asked about that yesterday. he said no study had been done about it, talking about the banking regulations, i think, primarily. we need to do more about that and face the reality that that's so. last week's economic numbers were not good. they were very, very troubling. we saw an increase in unemployment. we saw a decline in consumer confidence. we saw a decline in manufacturing in the midwest, a key area of our country nor manufacturing. a number of factors were noted during that period that were not good. it's part of a declining stock market which is down 5%, maybe 6% after five consecutive weeks of decline. and the united states senate has gone 770 days without passing a
budget. fundamental responsibility of this body required by statute that we pass a budget. the date is april 15 -- april 1 to commence hearings in the senate, and we've not met that responsibility. in fact, we haven't even had markup in the budget committee to commence considering a budget. and our democratic leader, senator reid, the majority leader in the senate, has staeutd it would be foolish to pass a budget. by that he means politically foolish for the democrats because they're enjoying trying to attack the house members who passed a responsible long-term budget that changes the debt trajectory of america instead of trying to do the same thing, they just attack their budget and produce nothing of their own. the american people are rightly
worried about our debt, they're worried about our economy, they are worried about overregulation, they're worried about lack of jobs. and this week austin goolsbee announced he would be resigning his post this summer. his dise departure is just the t in a trend of top economic advisors abandoning the administration over the course of the two-plus years since the passage of the failed $820 billion stimulus package, every pennepenny of which was borrowea guy there was to send out money and somehow artificially create a stronger economy. it failed, and many predicted it would failment. the president's first director of the office of management and budget, peter orszag, left in july of last year. christina roemer, the
president's chair of the council of economic advisors, left last september, larry summers, the former president at harvard, former director of the national economic council for the president, left last december, after less than two years. as a result of the failed stimulus and other debt that we've accrued, we're in much deeper debt. but americans know it is not made -- it has not made them better off. in fact, increased debt has further eroded the economic confidence that's necessary for a spirited recovery and has made our situation worse. many say that we have to borrow money to spend it and that's how you get the economy on a sound footing. thoughtful economists and others have said, not so. i believe the history has proven them to be correct, that borrowing to spend does not make us better off. the last deficit before the
president took office was $450 billion, far too much. the year before that the deficit was $162 billion. this year the deficit will be $1.5 trillion -- $1,500,000,000,000, the third consecutive trillion dollar deficit. yet the president and some of his economic teams have promised that their spending program would keep unemployment from rising above 8%. but more than two years later, unemployment has -- is now -- now stands at 9.1%, after having increased again last week. the economic numbers released friday show that this is the most disappointing economic recovery in 70 years. only 54,000 jobs were created in
may, making that the worst jobs report in eight months. the president asserts that he's responsible for adding two million jobs since he took office. but the percentage of our working-age population that is employed -- and we've had an increase in the working-age population -- but the percentage that is now employed has declined to 58.4%. you have to go back until october of 1983 to find such a low number. nearly half of the unemployed -- 45.1% -- are now classified as long-term unemployed, meaning they've been unemployed for 27 weeks or more. while the official unemployment rate increased from 9 for 9.1%, adding those who are
underemployed, meaning those who can't find full-time work or those who are so discouraged by the job market that they've given up trying to find work, would boost then employment rate to 16.1%. but perhaps most alarming of all, as pointed out in the june 4 lead editorial by alan ableson in barons, is that actual private-sector employment today is now 2% below where it stood 10 years ago. 2% fewer people are working today than were working ten years ago. that's -- he cited philippa dunne and doug henwood of the liscio report. "job losses over the ten years is unpress did noted since the advent of reliable tallies were
begun in 1890. es a talking about dunne, "we've regained just 1.8 million jobs lost in the great recession and its aftermath or about one in five." so, the situation -- policies we're following are not working. and we've got to get this economy moving, and we've got to get jobs created and 54,000 is way beyond what you have to have to stay level. that's about 180,000 a month need to be added. we added only 54,000, a net really decline in percentage terms of employment. so it is no wonder that the
president's top economic team leaving the administration, i would suggest. but rather than recognizing a need to change course, the president doubled down on the budget he submitted to congress. he told the american people his budget would -- quote -- "not add to the debt." close quote. and that it will allow us to live within our means, but the congressional budget office analyzed that budget and found otherwise, dramatically. in fact, c.b.o. said the budget the president submitted to this congress in february would double our debt over the next ten years, the total debt accumulate ted in the united sts history would double again in the next ten years -- under his ten-year budget. meanwhile, economists are warning that if we don't change
our debt trajectory and soon, our debt would stifle the very economic recovery that is moving far too slow. this is the important point, and it goes right to the heart of the argument that we've got to artificially stimulate this economy by borrowing money from our children so we can spend it today and that this is going to make us more healthy. a study by carmen reinhart and ken rogoff entitled "growth in a time of debt," in the american economy review of 2010, shows that economic growth is 1% lower on average in countries with gross debt above 90% of g.d.p. 90% of their economy. 1% lower. so if you want growth, you've
got to look at how big your debt is. and if it gets over 90% of g.d.p., then you show an average of a 1% reduction in growth. when asked about this study while testifying before the budget committee earlier this year, treasury secretary geithner called the reinhart-rogoff study excellent, adding "in some ways it understates the risk." in other words, it creates greater risk or economic or financial spasm that could put us back into a recession. steven roche, chairman at morgan stanley and lecturer at yale was recently asked on cnbc about what is happening with the economy, why the disappointing results, and this is what
mr. roche said, a professional economist and player in the wormed financial markets -- and player in the world financial markets. "i come down on this as ken rogoff and carmen reinhart do in their analysis of post-crisis economists. this is the way it is. when you have such a massive buildup of debt-free crisis, when you harms the consumers the way we did in this crierksz the economy is going to sputter." so america's debt stands now at 95% of g.d.p. it is set to exceed the entire economy by the end of this year and the president's own treasury secretary and widely respected economists are saying this could have a negative impact on the economy and jobs. it could cause a 1% decrease in economic growth, according to rogoff and reinhart. according to the council of
economic advisors, a 1% decrease in growth could cost about 1 million jobs. not 54,000. 1 million. so if we had less debt, instead of an anemic 1.8% growth the first quurkts as we come out of this recession, we should be seeing more than that, we would have probably had 2.8% growth, if this sthiewd mr. geithner considers to be excellent is accurate. certainly debt pulls down economic growth. common sense tells us so. so numerous experts agree that this debt is dangerous. it threatens our fragile economic recovery. growth is what we need for jobs and it brings in more tax revenues and helps us balance our budget.
but in response to our debt threat, what do we get? we got a budget from the president that would double the nation's gross federal debt in ten years. when that the budget received immense criticism when it was produced, the president then gave us a speech that suggested some changes. he called called it a framework -- he called it a frame wnch we wrote to him, members of the budget committee wrote to the president, said, put this in budget language. send it to us -- send to us a new budget then. people didn't like your first one. let's see this one. but they refused to do that. recently we voted on the president's budget in this senate. it was voted on. not one senator, republican or dearth voted for that budget -- republican or democrat, voted for that budget. it was utah irly rejected. -- it was utah irly rejec utter.
our democratic leadership had the power to call the hearings and have the meeting meetings td commence a budget markup to pass a budget. haven't offered one this year. they haven't passed a budget in the last 770 days. at least one was brought out of committee last year, but never brought up by senator reid on the floor to be voted on, so we didn't have a budget last year. and this year they didn't even bring the budget to committee. to be marked up. and the president said it would be fool ieb for us to have a -- it would be foolish for us to have balanced budget. foolish to have a budget in a time otimeof the largest deficis ever occurred, which will occur this year, approximately $1.5 trillion. $1,500,000,000,000 in deficits
would bring in $2.2 trillion we're spending $3.7 trillion this year, 40 cents of every dollar we spend is borrowed, and we don't even have a budget? and what do we do? the majority leader calls up the house budget, a responsible, historic alteration of the unacceptable debt path we're on, putting us on the right path. you can argue about some of the things that are in it. fine. but it changed the trajectory of america's debt path-to-courageoupath -- americd honesty. he brought it up so he could vote to down and attack it. producing nothing on his own. so i brought up the president's budget. it got zero votes. society failure of this body to
produce a -- so the failure of this body to produce a spending plan to tackle our nation's debt only creates more uncertainty in the economy. doubt and fear are driving away jobs, stifling growth, and investment. that is a fact. so, for nearly three years now, the white house has been i sedud by the vision of growth through artificial means, including trillions in fiscal stimulus spending and so-called investments. indeed, in a time of dramatic fiscal irresponsibility, the budget the president submitted to us called for a 10% increase in education, 10% increase in energy, 10.5% increase in the state department, 60% increase in rail and transportation. we don't have the money. that budget reflected utter
confusion and a detachment from reality, or our cities or our counties or our states increasing spending 10.5%. aren't most of them actually reducing spending? that's reality. that's what's happening in the rest of the world. the british reduced some of their spending recently far more than we have. some people there didn't like it and they complained that it was too difficult and too tough, but the international monetary fund in a recent report said stand by your guns. get your debt under control. in the long run the international monetary fund said this is the way to build a strong economy. we've been going the other direction. the keynesian siren's call to spend did not lead us to prosperity. we have restored only one-fifth
of the jobs lost in the recession as a percentage of our population. fewer are working today than during the so-called period -- during this recession. we are experiencing the weakest recovery in modern history. unemployment is back up again, and the housing market is back down. bad housing numbers came in last week also. our fast-rising debt and our inability to adopt a credible budget plan -- and we can do that -- is shattering economic confidence and jeopardizing our future. but our democratic leadership in this senate refused to put forward even a budget plan or to confront the debt that they have themselves urged so greatly. so we are told the president has not involved themselves
personally in discussions over the debt limit. that's been turned over to the vice president. one report says he no longer receives daily economic briefings. what signals do these actions send to out-of-work americans, to struggling industries and businesses and to anxious financial markets include out the world? instead of stonewalling a budget, the senate should be working together, republicans and democrats, to produce a budget that puts us on a sound path and makes our economy as robust and as dynamic as possible. that's so basic. blocking a budget under these economic circumstances is simply unthinkable. there is no quick fix, no accounting gimmick, no political trick that will solve these problems. we have a potentially healthy, growing economy. our american businesses have
never been leaner, never been more efficient. as federal reserve governor mr. fisher said on one of these interview programs. we've never had a more efficient competitive business environment in america. but in the long run -- and that's what we must focus on -- in the long run sound principles, common sense, spending restraint, less regulation, more commitment to the free markets will, if allowed, lift us out of this malaise in which we find ourselves. to put america back to work, the senate needs to get back to work. i thank the chair and would yield the floor and note the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call:
he is. a-- a senator: madam chair? the presiding officer: the senator from montana. morning business is closed. under the previous order the senate will resume consideration of s. 782 which the clerk will report. the clerk: calendar number 38, s. 782, a bill to amend the public works and economic development act of 1965, to reauthorize that act, and for other purposes. mr. tester: madam president? the presiding officer: the senator from montana. under the previous order, the time until 2:00 p.m. will be
equally divided between proponents and opponents of amendment number 392. mr. tester: i have seven unanimous consent requests for committees to meet during today's session of the senate. they have the approval of the minority and majority leaders. i ask unanimous consent that these requests be agreed to and these requests be printed in the record. with that, madam president, i will yield to the senator from rhode island and then do my statement. the presiding officer: the senator from rhode island. mr. reed: thank you, madam president. first let me thank the senator from montana for yielding and also for bringing this issue to the floor. i am reluctantly oppositing my dear friend, but doing so, i think, on the principles that are inherent in what we try to accomplish in the dodd-frank legislation, and that is to provide for transparency in pricing of financial products. and with that as a starting point, i will begin.
but before, i would i ask unanimous consent that robert peak, a fellow in my office, be granted privileges to the floor for the remainder of the 112th congress. the presiding officer: without objection. mr. reed: thank you very much. one aspect i think we have to consider is the, not just this specific amendment but the growing attempt to undermine the ability to implement the reforms incorporated in the dodd-frank legislation which are actually critical not just to protecting consumers, but also providing a foundation for an effective financial system in the united states, which is the foundation of, i believe, a growing and thriving economy. so this debate is not just about interchange fees. it's about comprehensively dealing with the problems that we saw manifest themselves in the financial crisis of 2008 and 2009, where market discipline collapsed, where great institutions, some failed and
some were on the verge of failure. if they had failed, the ramifications would not be simply restricted to wall street. they would be felt on main street and we would be in a worse financial position than we are today. but this specific amendment deals with the interchange fees or swipe fee. the first thing i think we have to recognize is these are really hidden fees. they're charged in each transaction a consumer makes using a debit card. every time you swipes the card which serves as an electronic check there is a fee. but the consumer doesn't see this fee. so basically you have disguised price. and if the price is disguised, then the consumer doesn't have a real indication of the cost. and if he doesn't know the cost, than that affects the rational economic decisions that we assume consumers are making every time they make an economic decision. but at the end of the day, despite the fact that the
consumers are unaware of these fees, he or she ends up paying them in higher prices for gas, for milk. in fact, they have been paying these higher prices for the privilege of using a debit card for years and years and years. debit cards are used more than checks today, more than credit cards to pay for everyday purchases. and these secret fees in a sense, might even describe them as hidden taxes on consumers, add up to billions of dollars a month. the durbin interchange provision of the dodd-frank wall street reform law sought to make these fees public for the first time. it requires that assets over $10 billion, the largest banks -- not the community banks, not the credit unions, but the largest banks -- these interchange fees set by the card network on behalf of its issuing banks must
be reasonable and proportional to the amount it costs to issue the -- the issuer, rather to, conduct a transaction. this is the law of the land. the federal reserve was given the responsibility of implementing the law and they're on the verge of publishing those regulations. senator durbin proposed this provision because businesses like in my home state of rhode island, cumberland farms, the old convenience store chain that i grew up w-rbgs it is the large -- grew up with, it is the largest convenience store chain in rhode island, the quintessential family-owned business, pays almost as much in these hidden fees as it earns each year in profits. these fees roughly equal their profit. now, interchange fees for cumberland farms are their second-largest expense. it's not the milk, not the gasoline, it's not a lot of things. it is their second-largest expense. despite the fact that the total
number of gallons of gasoline that they sold has remained flat, the interchange fees have increased 237% from $13 million in 2003 to a projected $48 million this year. again, prices are flat for commodities like gasoline, relatively speaking -- or number of gallons, rather. the price has gone up, but number of gallons is flat. but their fees have gone up almost 270%. the cumberland farms co-2 calls this increase -- c.e.o. calls this increase a runaway train. now that gas prices are about $4 a gallon, interchange fees have increased to 5 cents a gallon. for the same 15-gallon fill-up, the hidden fees increased 63%. so the motorists, the local rhode islander filling up at the
local corner gas station is paying 63% in their fees on top of increase in the price of gasoline. the actual debit card services haven't changed. but because the price of gas increased, the fees almost doubled. that's a pretty good deal for visa and master card and banks. unfortunately as these fees continue to increase, the increase -- they increase gas prices, prevent investment, preclude new hiring. the convenience store industry reports overall it pays more in these fees than it's earning in profits. that's overall across the board, across the country. here's another example: a very local company, very small business, chocolate delicacy in rhode island, it pays a swipe fee on every piece of chocolate sold when paid by debtor gift card which amounts to 60% of their purchases. the owner, mari shaller said she feels she has no choice but to
pay the fee. the growing swipe fees have meant a cutback in hiring for marie. at the beehive calf fee in bristol, rhode island, a cup of coffee costs $1.75. the swipe fee is 15 cents. because card fees are hidden and there is no availability to negotiate them, the owner said visa and master card inserted themselves into every single transaction that takes place ekwa*euting to a tax -- equating to a tax on commerce. this is not free enterprise. the small businessperson is trapped. when consumers pay for drinks with debit cards, 7-11 owners told me they lose money on every transaction. why don't supermarkets, drugstore and other merchants negotiate to pay less? they really can't. the fees are set by visa and master card and the card networks. they have no bargaining power. and most merchants are left with no choice but to accept the cards.
you can't play if you don't pay. in july 2010, we passed this interchange provision so that the federal reserve could study the fees and decide whether they are reasonable. in fact, the federal reserve found that they were not reasonable nor proportional. the federal reserve found that the average swipe fee was 44 cents for every purchase, but the processing costs were less than about 12 cents per purchase. giving them a 30% gross up on their actual costs. in december of last year, the federal reserve proposed rules to limit their fee to reasonable rates. the federal reserve's top economists are reviewing and considering over 11,000 comments on their current reasonable fee proposal. chairman bernanke has said that they are committed to issuing a final rule by july 21 of this year. i believe that they should be given the chance to study the 11,000 comments and complete the
rule. only by letting them do their work instead of destructing it are they going to be able to see if the new reasonable fee structure can open up this system and make these fees more reasonable and transparent. banks and card issuers who receive the fees have been vocal about their objection, preferring to keep the fees hidden and ever rising beyond the current 44 cents. with such a large profit margin in this line of business, most of us can understand why. mastercard said in its annual report to shareholders, and i quote -- quote -- "we are devoting substantial management and financial resources to the defense of interchange fees." visa told it may give them greater ability to wrap debit transactions onto competitive networks which can reduce the processing fees we currently earn. so the credit card companies are very much aware that there could
be a better competitive environment for merchants and consumers if this legislation goes through. that's what they have told their shareholders. now, small banks under under $10 billion in assets are exempt from the rule. in a survey conducted by the american banker found that an overwhelming majority believed that the law actually helped small banks. small banks will have a competitive advantage since their fees are not limited by the rules. now, the united states is not alone in closely examining these fees. the european union, canada, australia, new zealand, israel, spain, south africa and switzerland already regulate swipe fees. in addition to the ever-increasing swipe fees merchants are forced to pay for, merchants also bear the brunt of the cost of fraud. contrary to some of the assertions that the industry has made. it's my understanding that after fraud claims, networks typically
raise interchange fees, the company that has engaged or been subject to the fraud and often engage in litigation against merchants to recoup fraud losses. and, of course, all of these costs, the merchants' costs and i think also the interchange costs are passed on to consumers. there are some examples. when criminals install scanners to obtain customer account information at michael's, a craft store, it was only the latest theft of such consumer data. community banks were quick to respond and immediately issued new cards and returned stolen money. however, despite paying millions of interchange fees in the recent past, michael's may have to reimburse visa, mastercard and the bakes for these re-- and the banks for these replacement costs. in another example, in december, 2006, tj maxx discovered that computer hackers had broken into their computer network and stolen customer payment card data. in march of last year, a federal judge sentenced one of the computer hackers responsible to 20 years in federal prison.
since 2006, tj maxx has spent about $170 million in costs related to this incident, including nearly $65 million to visa and mastercard to compensate banks for the costs of the fraud. this, of course, is in addition to continuing to pay their interchange fees. the same hacker who hacked tjmaxx also hacked heartland payment systems. that attack cost heartland over over $140 million. the majority of which was paid to visa and mastercard and other banks to compensate for the costs of the fraud. heartland payment system had to pay the banks and visa and mastercard for the computer fraud committed. so the computer -- the consumer, rather, pays for the data breaches, the consumer pays for the debit card fraud, and the consumer pays more and more for interchange fees. i think any further delay in the rules require reasonable swipe fees only harms small businesses
and in the end the consumer. the amendment before us provide for at least a 12-month delay in the rules. in addition to a six-month study and effectively a completely new version of the proposed rules. now, i think it's unreasonable. there is no reason to delay. the federal reserve has what chairman bernanke characterized as, in his words, plenty of information. from over 11,000 comments on the federal reserve december 2010 rule proposal. in addition, the federal reserve has done an enormous amount of surveying of the industry. again, in the words of chairman bernanke. and the proposal before us provides the banks i think another way to avoid transparency in their operations. the federal reserve should be allowed to finish their rule to establish a reasonable fee for debit card services, and then we can work with the bank regulators to make sure that their rules do, in fact, work and do, in fact, provide for a more transparent, competitive marketplace to the benefit of merchants and consumers.
now, our market system only works well if merchants and consumers have the information they need to make informed choices, and that was what was at the heart of this provision in the dodd-frank act, and that's what is at the heart, i believe, of the dodd-frank proposal overall, which is to provide better information, more transparency, whether it be credit card or debit cards or it be complicated derivatives, because armed with better information, individual consumers and individual merchants can make better choices about economic decisions that will accrue to the benefit of all of us. and with that, madam president, i would yield the floor. a senator: madam chairman? the presiding officer: the senator from montana. mr. tester: i want to thank senator reed for his comments. he is one of the senators on the banking committee. i appreciate his comments. i do want to set the record
straight on a couple of things. it's not a 12-month delay and a six-month study. it's a six-month study and then implementation of the rules. said senator said that chairman bernanke had plenty of information. the problem is he doesn't have much information from community banks and credit unions, and that is what this amendment is about. the exemption that is in the amendment that we passed last year called the durbin amendment, every regulator at the federal and state level has said they cannot make the exemption work because market forces will determine where the customers are. madam president, i'm glad that we're here to vote on the amendment that senator corker and senator hagan, senator crapo, senator bennet and i have worked so hard on. this afternoon, we're finally going to have an opportunity to vote for an amendment that has been crafted the right way. senators hagan and crapo and bennet came to senator corker and i are a month ago to chair
their -- and i about a month ago to share the inintended consequences of the senate that was passed in the senate about a year ago. the amendment directed the federal reserve to issue regulations limiting the costs that banks can charge retailers when consumers use their debit cards to buy things. based on the law, the fed intends to limit those costs to 12 cents. even though the actual costs of these transactions may be higher. now, the big wall street banks, they can handle that. they're not happy about it, but they can live with it. they have got plenty of tools that will help them make up the difference. the main street community banks or credit unions are a different story. these small guys who had nothing to do with the financial crisis did not have that same flexibility that the wall street banks had. and these are the banks in montana. these are the folks that i want to make sure have a fair shake. so folks from both parties came
together and they said how can i fix this to make this protect the local banks and credit unions, since the original amendment does not? senator corker and i suggested initially a two-year delay, a study and then more legislating to fix any problems that were identified in the study. the senators who are here today with me thought we could do better, and we could and we did. after talking with our colleagues, we worked together to reduce the study period down to, as i said earlier, six months. at that point, the fed and other regulators will decide if the rules can adequately prevent the small banks from getting hurt. i don't know what the study is going to find, and i don't think that anybody knows. if the agencies find that the rules consider all costs, that consumers would not be harmed and that the small issuer exemption, those that applied to credit unions and community banks, if that exemption will
work, then the pending rules would move forward as passed. and i will be the first person in line to tell senator durbin that he was right about the two-tiered system. but if the fed and the other regulators find that the changes must be made to ensure that current rules don't include all costs or that small banks and credit unions and consumers might be harmed, then they will have to issue new rules within six months. and every two years, the fed would have to tell us in congress whether these rules are still working for the small banks and credit unions. that's all we're asking for. before the fed's new rules get implemented, let's make sure we have them correct. the good senator from illinois yesterday said that this was not truly a compromise, but when you sit down with folks who think you're on the wrong track and you work together to find middle ground, well, to me, that's the definition of compromise.
some other changes have been made about -- some other charges, i should say, have been made about this amendment, and i'd like to take a moment to discuss those. some say it's a favor to the big bank. well, it's not. in fact, this amendment corrects a very big problem that only affects the community banks and credit unions. the senator from illinois said yesterday that he crafted this amendment with awareness that major reduction of interchange fees would kill the small banks and credit unions. no one denies that the small banks and credit unions would be deeply harmed if they are forced into a system where they can only charge 12 cents per transaction. no one denies that. this is why senator durbin tried to establish a two-tier system. under his proposal, big banks,
big banks, the wall street banks could charge one rate, 12 cents per transaction. the small banks, community banks, credit unions, could continue to charge a percentage of the transaction, 44 cents on average. but there is a big flaw in the plan. the two-tiered system simply will not work. let me repeat that. the two-tiered system simply will not work, and i didn't make that up. here's what the chairman of the federal reserve said. "it is possible that the merchants will reject the more expensive cards from smaller institutions or because networks will not be willing to differentiate the interchange fee for issues of different size. it is possible that the exemption will not be effective in the marketplace." that was ben bernanke that said that. he went on to say that because the exemption will not be effective, small banks could be hurt or even fail.
here's what the head of the fdic said -- "the likelihood of this hurting community banks and requiring them to increase the fees that they charge for accounts is much greater than any tiny benefit that the retail customer may get." again, madam president, everyone agrees that if the fed rules go into effect, the small banks and credit unions will suffer because the exemption simply will not work. so today we can stop and double check to make sure that that does not happen or we can just flip a coin and hope for the best and watch as more small banks and credit unions fail. reducing consumer choice and reducing banking options, especially as they currently exist in rural america. these small banks and credit unions are the ones who make the loans to small businesses in rural america, they are in places where folks are still willing to put their money.
they are the ones who folks in montana still trust. they don't trust the big wall street banks. we probably won't lose to many banks in washington, d.c., or chicago, illinois, but we will in rural america. i don't want to see that happen. another good one that i've heard this week is the argument that the amendment will allow banks and credit unions to factor executive compensation into the cost of interchange fees. it will not. in fact, the amendment specifically states that the federal reserve and other banking regulators must look at the costs associated with debit card transactions and program operations. we also know how dangerous it is to set a price for a product without understanding all of the costs that go into that product. home depot would never allow the federal government to set the price of a garden hose simply by looking at the costs of
manufacturing that garden hose. no, home depot charges us for the cost of manufacturing it, shipping it, keeping it in stock, having someone to tell you what aisle it's in, and the list goes on and on and on. likewise, if we're going to be regulating debit interchange fees, we need to understand all of the costs associated with debit transactions and debit programs. when swreetd on this amendment, last year, we thought we were voting to allow the federal reserve to consider all costs. however, the reality is that last year's interchange amendment limited the cost that could be included. some fraud costs were allowed to be included, others were not. some technology costs were included, but others were not. if we're going to be regulating this market, we need to be fair about it. so the amendment directs the fed to determine what is reasonable and proportional, but it gives the fed the discretion to look
at all of the costs associated with debit transactions. that does not mean executive pay. that does not mean special rewards programs. all costs will still need to be justified, and if they cannot be justified, they will not be considered. the fed has been very clear with me. no executive pay, no bells and whistles. but the decisions about the costs of routing networks, the costs of fraud, and other technical details are much better left to the fed than decided by the united states senate. finally, madam president, some have said that the amendment hurts consumers. it does not. as someone who voted against the wall street bailout, who wrote part of the credit card reform act, and who voted for the wall street reform bill, i can tell you that if this amendment was somehow bad for secures, is wouldn't offer it. in fact, the amendment requires the regulators to certify that
the fed's rules address consumer concerns. the current law does not require anyone -- it does not require anyone to look at the impact of interchange fee regulations on consumers. they're out of the picture. i am not aware of any specific plans by any retailers to lower prices if interchange fees are lowered. one box store held a meeting where the company executive called the proposal to lower interchange fees a $35 million windfall. if i were a shareholder, that would sound pretty good to meevment as customer, it is not clear how i would benefit. i understand that there are some folks who wish the amendment would go further to include additional consumer-oriented agencies like the federal trade commission. i would be happy to work with those senators to see how we can
best protect consumers in the process. the only way to make it happen is to get this amendment adopted today. otherwise the fed's rules will go into effect on july 21 regardless of what any consumer thinks. i'm looking forward today's debate. it has been a long time coming. because we have the opportunity to address an unintended consequence of the durbin amendment and make no mistake, those unintended consequences will be felt all over rural america and not for the better. the folks who think that the two-tiered system will work, there is not a regulator out there that will tell you it will. the folks that will tell you that the durbin amendment has an exemption for community banks under $10 billion and credit unions under $10 billion, if they think that will work, there's not a regulator out there that will tell you they can implement it, because the free market system will drive it to the lowest price.
that's the system we live in. that's just the way it is. so i'm saying, let's slow down a little bit. let's make sure we get it right. if we're going to create regulations, let's do it in a way that's fair and consistent with the intent. let's not try to solve one problem and create three others. and let's not take shots at folks in my neck of the woods who are not part of the financial meltdown. that's all i'm asking. i'm urlging my colleagues to support this amendment. with that, madam president, i yield the floor. madam chair, i would ask consent that the time be divided equally during the quorum call between each side, and then i would -- the presiding officer: without objection. mr. tester: until the vote? the presiding officer: without objection. mr. tester: on all the quorum calls. and with that, i ask for the
but the story that is the front page of "roll call." of light which is splitting democrats. steven dennis joins us live on the fun. thank you for being with us. set up the debate that we will hear later today. what are the issues and what is senator durbin specifically proposing? guest: we have a showdown between the banks and retailers. it is over a pot of money, about $1 billion a month up for grabs here.
inside the beltway battle that's been raging for months. it hasn't really penetrated to the public, because they are not aware of the fees that are getting paid to the banks every time they use their debit card. it ends up being about 44 cents every time on average. the debate is whether that 44 cents is going to go down to 12 cents. that's what was voted for last year, but the banks have been the presiding officer: the senator from wyoming. mr. enzi: madam president, i would ask that the quorum call be ended. the presiding officer: without objection. mr. enzi: and i would ask permission to speak as one of the opponents of the amendment. the presiding officer: the senator is recognized. mr. enzi: thank you, madam president. i rise today to express my strong opposition to the tester-corker amendment number 392 to the economic development
administration authorization affect. the interchange debate is not a new one for the senate. this is an old discussion with both sides, financial institutions and retailers, bringing their perspectives to the table. i should know, i'm a former small businessman and retailer. might have wife and i owned and operated enzi shoes, a family retail shoe store in wyoming and montana for over 25 years. retail stores have been clamoring for a change for years and have always felt ignored by the credit card and the big-bank card companies. stores with small-priced items are forced to allow a sale to be put on a debtor credit card while some stores post signs that require minimum purchase they're violating their service contract. if the fees were merely a percentage of the sale rather than a minimum amount or percent, whichever is larger, much of the argument would be gone. without the percent fees, small
businesses have no leverage for negotiation. soon vending machines will allow you to kind of point your cell phone at the vending machine and click, you'll get your snack or your soda and it will be billed to your debit card. but if the cost of making that purchase eats up the profits on the sale plus some money out of the vending machine owner's own pocket, every time someone buys a soda or snack, will the machines be available? no. you can't be in business if you lose money on every sale. the vendor has an option. they can charge as though every sale is a debit card sale and increase the cost of the item to cover whatever cost the debit card company puts on your purchase. what you have right now is this hidden fee that goes to a card company. the card companies share that fee with participating banks. banks are now saying if they lose that fee they'll have to
charge their customers in other ways. i'm told the average bank will have to make up about $150,000 in hidden fees that they're now receiving that customers have been paying on their purchases and don't know about it. are hidden fees fair? i fight them every chance i get. according to the wyoming retail federation, retail stores, hotels, restaurants and small businesses in wyoming consistently report that credit, debit card fees have tripled in the last ten years. these fees have become a major cost, now surpassing other traditional costs of doing business. this is a small business issue. small businesses, particularly because they don't have the leverage to do any negotiating -- incidentally in this case, neither do the big companies. but the small businesses are paying two or three or four times and sometimes more for credit and debit charges. when i recently traveled to wyoming, a businessman compared
his expenses in the last five years to explain the effects of interchange fees on his business. gross sales for 2005 and 2010, $5 million and $5.5 million a year. percent of sales made on credit cards, 15% in 2005; 37% in 2010. sales in the last five years increased 10%. credit card fees increased over 100%. credit and debit card fees as a percent of total sales, they were .3% in 2005 and 1% in 2010. so the fees tripled in just five years. the retailer has no control over that. it's a monoply. when your bank raises fees, if you know about it, you can change banks. the debit card business is like a monoply, so when the debit card increases their fees, the
only alternative is not to accept the cards as payment. but the cards have become a way of life, and they know it. the profit margin of business is too narrow to sustain these increases. this is why defeating the tester-corker amendment means saving jobs in my home state of wyoming and around the nation. increases in interchange fees are cutting into resources that could be used to provide more jobs. during the financial regulatory reform debate last year, senator durbin offered an amendment that tasked the federal reserve -- the fed -- with studying the actual cost of debit card interchange costs versus fees being charged. i voted in favor of the durbin amendment hoping that it would create dialogue and a commonsense compromise on this issue. i was trying to force this dialogue clear back in my shoe-selling days. card companies didn't pay any attention. i tried ever since becoming a
senator. i've been ignored. the durbin amendment is the only thing that's gotten the debit card big-bank attention. did they try to resolve it with the stores, the stores who were generating the sales and, therefore, collecting their revenue? again, a resounding, no, they haven't met with them at all. they've spent a fortune trying to convince you that their monoply is okay and they shouldn't have to do anything about it, that they have always been right, they're still right, they're going to be right, and they don't have to talk to their customers, which are the stores. i encourage the banks to listen and to negotiate, but they chose to advertise the message to make stores look like the bad guys. they have spent a small fortune advertising and messaging. one day on my way to work i came by a place where they were giving out insulated coffee cups to give this message that the big banks were going to be put out of business by this
amendment. we all know too well, dialogue is occurring in the halls of congress, but that isn't going to rectify the problem. i agree that government should not determine a set price on fees. say that again: i agree that the government should not determine a set price on fees. but if a huge segment of the economy makes a case for redress, then it will likely fall under what i call the probable legislation rule number 3, and that's if it's worth reacting to, it's worth overreacting. that's not a good way to legislate, but unfortunately it happens a lot in washington. it may have happened in this case. i've worked for years, though, to bring the retailers and the big banks to the table to discuss and negotiate interchange fees to make the system work better for both parties. it hasn't happened. and that's when we get to this reaction time. since passage of the bill last july, there has been ample time for the banks and the retailers to work out a solution.
dialogue between the financial institutions and the retailers has to occur in order to find immediate and a real solution to this problem. the interchange fee provision is an important issue that deserves full attention and consideration of both intended and unintended consequences. but our nation's retailers and small businesses can't afford to continue delays and studies because what we're doing today is, if it passes, is kicking the can down the road to keep things just the way they were. oh, yes, it looks like there's going to be some interaction there. if the big banks win today, the customers of stores lose. following the passage of durbin amendment s. 575, which was introduced this year by -- the amendment by tester and corker is a stand-alone bill to delay implementation of the federal reserve rules until the impact
of those fees can be studied for another two years. that's the original bill that this amendment comes from. a similar house bill proposed to delay, study the debit card interchange fee rule for one year. now searching for votes, tester and corker have changed their amendment, so what we'll be voting on today is a study and a year of kicking the can down the road. but even though it's been changed, it's still wrong. my colleagues knew that i was not willing to support the original two-year delay which would effectively bury progress made on the issue. a two-year study was not just kicking the can down the road. it was making an indefinite delay on any changes and prohibiting dialogue between parties. now, i commend senators tester, corker, crapo and others for working to decrease the study time line from two years to 12
months. as you've heard during this debate, the tester-corker amendment would allow for six months of study for the interchange fees plus an additional six months for the treasury and federal reserve to draft a final rule. while this is a step forward in the resolution, more needs to be done to accelerate this process. another full year without a solution is too long for merchants and retailers. now, there's another problem too, and that's that the fed will still be making the rule. and you've got to realize that banks work with the fed all the time. so banks understand the fed. the fed understands the banks. retailers don't work with the feds. the feds don't check on the retailers. so, how do you think the rule that the fed will write will come out if we kick the can down the road another year? i think the banks will have a big advantage.
and what we need is for the banks to listen to their customers, the retailers, to listen and come up with a workable solution. the fed isn't the right place for that decision. the fed just made a decision and the banks decide they didn't like that decision. and, quite frankly, for some of the small banks, there is a problem because what was allowed for small banks to give them an edge isn't ever going to happen because people will shop where it's cheapest which will be with the big banks. so, i think that the feds did get it wrong, and i don't think that the banks will get it right unless there is something that is real to them. july 21, the current rule will go into effect. july 21, they will finally feel that it's real and that they ought to sit down with their customers, the retailers, and get it figured out. i don't think it's that tough.
i know where the changes were that i would have liked to have seen, and i didn't represent the whole gamut. but there are a few associations that would be viable to work this out. it doesn't need to be done through legislation. but if today we defeat -- if we pass the tester-corker amendment, there won't be any incentive for them to do anything for at least another year because the problem still won't be real. the banks don't think there's a problem. the retailers know there's a problem. the retailers' customers are beginning to understand that there's a problem. i just saw a survey from montana, and 75% of the people were opposed to the swipe fees that are currently in place. 75%. you know, america's figuring things out faster than congress is, and we've got to be with the people. we've got to take care of the problems that they see, especially when it's that huge of a majority. i don't like doing things based
on polls, but i do like polls to give me an indication. i go back to wyoming almost every weekend, and i travel to a different part of the state every weekend, and i talk to the real people. i don't just read it in papers or read studies. i can tell you that 75% is phrobl just -- probably just about right. it might be slightly hire than that in wyoming. so, the banks and the retailers should get together and come up with a rule that will work for both of them, but not one that maintains a monoply. when you sign on to one of these credit card agreements and you have to do one of those in order to be able to accept them and have the money work through the system back to you, you're not given any options. there isn't anything you can shop around for because all the agreements are the same. if you sign one of those agreements, you have to be willing to accept it no matter what the size of the purchase. now, if you're selling a soda
for $1 and you're paying 44 cents, you know that the soda company isn't making enough to cover the 44 cents. so they've got to raise their price, which gets passed on to the customer. now, they've got to raise the price so that it covers the credit card, but it also has to cover the other sales then because they can't lose on -- there is no way for them to distinguish one from the other. they're not allowed to charge more for a credit card sale than they do for a regular sale. and they shouldn't. so they build in that fee, and it's just a hidden fee. you don't know that you're paying that fee. but it's a huge fee, and it takes away some of the profits on the small sales. and that's one of the primary areas that's driving this whole issue. there are other areas too, but that's the simplest one that could be figured out. so, both sides in this issue
need to have a hand in the negotiating. defeating this amendment gives them both a hand. that's why i strongly believe that two things are needed to occur to fix this problem. one, any study shouldn't be longer than six months in total length study time and drafting of the rule. two, banks and credit unions must come to the table with retailers and merchants to find some middle ground. it would be more workable if bankers and retailers sat down and negotiated an agreement. they don't need a study. the retailers know what the problem is. the banks know the problem better than the retailers. all they have to do is skip the study, sit down and work it out. i think it would be worked out before july 21. a deadline is always good. so we really do need to defeat that. it's a tough issue for small business owners, merchants and retailers because many of our community leaders have come to rely on this interchange income. no good comes from pitting small businesses against community
lenders, in wyoming or otherwise, and especially not in this economy. bankers already know what changes need to be made. if they put more effort into forcing bank cards to be more reasonable, they can solve more issues. i'm pretty discouraged that now that i'm in the senate, they still weren't listening, too, but this bill has gotten them to listen. so no more delays should occur. interchange fee reform was overwhelmingly approved by congress last year. u.s. consumers don't need additional studies to tell them they already pay the highest swipe fees in the world. delaying these reforms will delay urgently needed relief for american businesses and consumers, relief that can't wait longer during this fragile economic recovery. so today i ask my colleagues to side with the stores and their consumers. otherwise, -- and their customers. otherwise, we'll just have done
another bailout for big banks. i yield the floor and reserve the balance of the time. mr. durbin: madam president? the presiding officer: the senator from illinois. mr. durbin: madam president, i'd like to thank my colleague from wyoming, and our relationship and friendship has been growing over the years, and i respect him so much. as one of the real voices of retailers and small business. i had an opportunity to spend some time visiting china with him and his wife. we got to sit down and talk about their lives and what they have been through. you know the small business side of this world better than anybody who sits in this chamber. as i listen to you talking about the solution to this problem, i couldn't help but nod affirmatively. there is no reason why we should have had to vote a year ago to establish this interchange fee. it reflected the fact that retailers, small businesses, merchants, hotels, restaurants, shopkeepers across the board were literally given no seat at the table to discuss the
fairness and propriety of these interchange fees. and the point you made drives it home. the credit card networks working through the banks are charging our businesses in america the highest interchange fees -- that's the fee charged every time you swipe that plastic debit card -- of any country in the world. the interchange fee in canada is zero. in the united states, 44 cents on average on every transaction. and i couldn't agree with you more, if the banks would come down out of their ivory towers on wall street and other places and sit down, roll up their sleeves with the folks running shoe stores and grocery stores and hotels and restaurants, and say all right, we're going to come up with a fairer system. if it's zero in canada, it's 44 cents here, there is a number in between that could make sense to both sides. if that were the case, you and i
would be working on some other issues rather than this one. but you're so right, today, today we have to defeat the tester-corker amendment. otherwise, we are sending a massive, massive subsidy to the biggest banks on wall street, up to $8 billion a year that they collect in these debit card interchange fees, at the expense of small businesses and consumers all across america. i thank the senator for his support and i know later this afternoon at 2:00 when we face this vote, it's an important vote for every small business in your home state and mine as well. i thank you for taking the floor, and i suggest the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call: